On Thursday, investors will be looking closely at the CPI figures for March as released by the US Bureau of Labor Statistics. This priceless data has huge repercussions for many financial markets. Expectations are high that this data could help U.S. Dollar performance. It will be fundamental in determining the Federal Reserve’s policy trajectory. Clearly the market is looking forward to the big report on deck, with high anticipation. The second kicker to the equation is how President Trump’s recent tariff pause is shifting global risk appetite and more.
Going forward, CPI data will likely be one of the most important pieces of evidence to watch for signs that inflation is moving back toward more normalized levels. Consumer behavior and Federal Reserve policy decisions will be affected if analysts’ predictions come to pass and the numbers end up going in the wrong direction. Improper CPI usage Perhaps one of the highest profile uses of CPI data is by the Federal Reserve to determine inflationary pressures and set interest rates. As a result, the market continues to be very jittery at any surprises in this report.
In short, U.S. Dollar is under a bit of pressure heading into the CPI release. Currency investors are particularly concerned about how the data will impact the strength of the US dollar, and overall market sentiment. As details emerge on inflation levels, it could dictate not only the Dollar’s trajectory but investor confidence in the Fed’s future actions.
At the same time, gold has been performing strongly, holding above $3,110 in Thursday’s trade. This price does not include just Wednesday’s continued rise, which is an extraordinary price increase in and of itself. The price of gold has historically acted as a measure of investor confidence, especially during periods of economic distress. Should inflation turn out to be higher than expected, gold may rally even more as investors flock to safe-haven assets.
On the other side of the Atlantic, the British pound is skyrocketing. Energetically, traders are welcoming a risk-on mood that’s driving the momentum. The GBP/USD currency pair has recently surged above 1.2900, which is the first signal of increasing investor confidence. After Trump tweeted about a pause in tariffs, that news created a big bullish spike in the market. Since this announcement, risk appetite has increased dramatically across the board for investors.
Investors have been closely reacting to the trajectory of geopolitical events and indications from monetary policy. Consequently, the Euro is very strong on the market. The European Union just announced a 90-day extension of its own tariffs on U.S. products. This decision has driven up the currency. The EUR/USD cross jumped even more on Thursday, taking out 1.1100. Traders overwhelmingly favor the Euro. This movement is a testament to the growing preference traders have for the Euro.
U.S. bond yields have fallen sharply. This drop occurs against the backdrop of increasing concerns about a possible resurgence in China-U.S. trade frictions. In the background, a deepening trade war is the sword of Damocles. It’s hurting overall investor sentiment and inflating prices across the bond market as yields fall.
As Thursday goes on, everyone will be looking at the March CPI print that comes out Thursday morning. Through the US dollar’s extreme dominance, the market’s laser-like focus on inflation will dictate currency valuations. Second, it will influence market expectations concerning the future path of the Federal Reserve’s monetary policy. The inflation data vs. geo-political events tug-o-war will certainly be pivotal for investors trying to steer through this uncertain, ever-changing landscape.